Pricing and Coordination of a Dual-Channel Supply Chain Considering Price Reference Effect and Return Service

With the development of dual-channel supply chains, consumers have more purchasing options, and reference price effects have become increasingly important in shaping their purchasing decisions. To attract consumers, some suppliers and retailers need to adjust their pricing strategies and provide measures such as return services to gain more profits. To address these problems, considering that the reference price effect and return service level are important factors affecting the supply chain, we construct game-theoretic models for a manufacturer-dominated dual-channel supply chain comprising one manufacturer and one retailer, use them to examine the optimal decisions, and analyze the effects of the reference price effect and return service level on the supply chain. Then, a two-part pricing contract is developed. The results show that, within the feasible parameter region, a higher return service level improves the total supply chain profit. In the parameter regions examined, a stronger reference price effect increases the manufacturer’s online channel demand and revenue, whereas the retailer’s offline channel demand and revenue tend to decrease when the return service level is relatively low. Furthermore, the manufacturer’s profit increases, while the retailer’s profit may decline at relatively low return service levels. A sufficiently high return service level can mitigate this adverse effect. The proposed two-part pricing contract yields a feasible interval of fixed transfer fees within which the profit conflict between the manufacturer and the retailer can be resolved.